Derbyshire Police said the man was detained today on suspicion of breaching the 2003 Iraqi Sanctions Order, which governs the importation of "Iraqi cultural property" - including items of archaeological, historical or religious importance.

The buttock - a 2ft lump of bronze - was saved from being melted down as scrap metal by 52-year-old former SAS soldier Nigel "Spud" Ely after he witnessed Saddam's statue being toppled by US Marines in Baghdad in 2003.

It is understood that the arrested man is connected to Derby-based war art relic company Trebletap, which is attempting to find a buyer for the souvenir on behalf of Mr Ely.

As well as expressing shock at the arrest, Mr Ely described the Iraqi authorities' claim to be rightful owners of the bronze as "like the Elgin Marbles with attitude".

The London-born veteran, who lives in Herefordshire, recovered the memento of Saddam's downfall while working alongside a TV crew in April 2003 and unsuccessfully tried to auction it off in aid of injured troops last year.

Describing the furore surrounding the buttock as farcical, Mr Ely questioned how a piece of metal from a statue put up by a dictator could be classified as national cultural property.

The ex-soldier asked: "How can it be classed as cultural property when it was put up by the biggest tyrant since Attila the Hun?"

In a statement confirming the arrest, a spokesman for Derbyshire Police said the 66-year-old had been detained on suspicion of breaching Section 8 of the Iraqi Sanctions Order 2003 and had since been released on bail pending further inquiries.

Mr Ely, who recovered the 24lb piece of bronze with the help of US Marines, believes that Iraqi officials decided to demand the return of the war relic after seeing media coverage of its value.

"American Marines gave it to me and at that time Baghdad was under American control," he added. "There wasn't even an Iraqi government and I have since turned it into a piece of war relic art.

"This is like having a chunk of the Berlin Wall - it's part of history but it's not cultural property."

Police have also interviewed Mr Ely about the statue and requested that he sign a document warning him that if he sold or defaced the buttock he could face prosecution.

"The piece has been independently valued at £250,000 and I think that's why the Iraqis want it," Mr Ely said.